The suspension of the Federal Government’s naira-for-crude deal with Dangote Petroleum Refinery has triggered fears of an imminent fuel price hike, as some filling stations begin stockpiling Premium Motor Spirit (PMS).
The Independent Petroleum Marketers Association of Nigeria (IPMAN) has cautioned marketers against panic buying, warning that hoarding fuel in anticipation of price increases could lead to heavy losses.
Dangote Refinery Halts Naira Sales
Last week, Dangote Refinery, which has a capacity of 650,000 barrels per day, announced it was temporarily stopping the sale of petroleum products in naira. The refinery cited a mismatch between its sales revenue and its crude oil purchase obligations, which are denominated in U.S. dollars. “To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” the company said. Following this announcement, the cost of loading petrol at private depots in Lagos surged to about N900 per litre, up from less than N850 per litre before the suspension.
Depot Owners Increase PricesIPMAN’s National Publicity Secretary, Chinedu Ukadike, stated that depot owners had increased prices in response to rising demand, even as some filling stations rushed to stockpile fuel. “Some depot owners are already increasing the price. But we are also asking our marketers not to panic-buy. If Dangote Refinery resumes naira sales and crashes prices, those who bought at high rates will suffer losses,” Ukadike said.
FG, Dangote Resume Talks The Federal Government and Dangote Refinery are reportedly in discussions to resolve the naira-for-crude impasse. Sources from the Federal Ministry of Finance and the Federal Ministry of Petroleum Resources confirmed that a Technical Sub-Committee on the Naira-for-Crude Policy was scheduled to reconvene today (Monday) to review possible solutions. Industry experts warn that the suspension of naira sales could put additional pressure on the foreign exchange market, as petroleum marketers would now need to source large amounts of U.S. dollars to purchase fuel.
Challenges in Crude Supply Sources indicate that the Nigerian National Petroleum Company Limited (NNPCL) may be struggling with crude availability, as it has already committed large volumes of its future crude production to international lenders. In response, the NNPC has initiated fresh negotiations with Dangote Refinery over the renewal of the naira-for-crude deal. Since October, the NNPC has supplied the refinery with 48 million barrels of crude.
Impact on the Economy
The suspension of the naira-for-crude agreement may have wider economic implications, with fears that it could lead to fuel price instability. Some industry players suspect that the move is an attempt to curb Dangote Refinery’s growing influence in the downstream sector. The Crude Oil Refinery-Owners Association of Nigeria has criticized the suspension, calling it a setback for energy security efforts. Meanwhile, imported petrol shipments continue to arrive. According to a Nigerian Ports Authority document, seven vessels carrying 154.22 million litres of PMS were expected to berth at three seaports between March 17 and 23, ensuring continued fuel supply.
Background on the Naira-for-Crude Deal The naira-for-crude policy was introduced after President Bola Tinubu’s administration proposed selling crude to local refineries in naira instead of dollars. The policy was adopted to support domestic refiners, with Dangote Refinery serving as the pilot project. However, challenges arose when international oil companies (IOCs) allegedly frustrated Dangote Refinery’s crude supply by prioritizing exports to Asian markets and demanding dollar payments. With ongoing negotiations between the Federal Government and Dangote Refinery, stakeholders remain hopeful for a resolution that ensures stability in the petroleum sector.
